Demonetisation impact not expected to spill over to next fiscal year: Shaktikanta Das

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New Delhi: The focus will be on speedy implementation of the 2017 budget proposals, said Shaktikanta Das, secretary, Department of Economic Affairs at the Mint CNBC TV18 post-budget event. He also talked about the government’s commitment to fiscal consolidation and the impact of demonetisation on the economy. Edited excerpts:

On the focus of Budget 2017:

This budget is very strong on fiscal, on macroeconomic parameters and on reforms. Now it’s a question of continuing with (the) same priorities and the implementation. On the whole, it has addressed almost every sector of the economy and has taken steps which will definitely produce visible impact in the coming year. The finance minister had said that focus will now be on the implementation of various proposals. In fact, we have written to the secretaries of other departments to start implementing the budget proposals.

On the impact of demonetisation:

So far, all the assessments about the impact of demonetisation are based on anecdotal evidence. There is some impact, which nobody is denying, but let the numbers come. There is a segment of economy which was dependent on cash, particularly the informal sector. But the impact is not expected to spill over to the next year and this fact is recognized by all the rating agencies. Huge amount of low- cost deposits are available with the banks, which will enable them to lend at lower rates, not only to the industries and MSMEs but also to individuals. This will bring a positive impact on the consumption cycle in the economy.

On divergence from fiscal deficit:

We have not deviated from the path of fiscal prudence. The economy requires investment in certain sectors including rural, infrastructure and others, which has to be made. The FM decided to adopt 3.2% (in 2017-18), with a clear commitment to reach 3% in the following year, making a sincere endeavour to improve upon 3.2% in 2017-18. There is scope for more revenue due to huge cash deposits. Should that happen, I expect the fiscal deficit number to improve over the next year.

On Railways:

The FM has touched upon all the critical issues that confront the Indian Railways today. He mentioned improving the operating ratios, tariff fixation, recognizing the fact that railways today faces competition from other modes of transportation dominated by the private sector. Railways is very much a focus area of the government. A decision to go for a public listing of three railway entities—these can come in only when the Railways become a part of the general budget.

On double entry accounting system for the budget:

World over, the budget is on a cash basis, you cannot have an accrual budget and plan for your expenditure. Hence, the budget has to continue on a cash basis. Contingency provisions have to be kept in mind while planning for any expenditure.

On FDI and abolishing FIPB:

Everything does not come under ‘automatic route’ by default with the abolishment of FIPB (Foreign Investment Promotion Board). FIPB will continue to remain till a successor mechanism is in place. Approval could be given by the sector regulator or may be by the concerned ministry. This will fasten the process as the concerned regulator/ministry will have limited applications. It is a strong signal to the investor that government interference has been minimized.

The government is reviewing the FDI (foreign direct investment) policy and examining the extent to which some sectors can be liberalized.